Paul Ryan: Obamacare cost-sharing subsidies will not be part of bill to keep government open

John SextonPosted at 3:31 pm on April 26, 2017

House Speaker Paul Ryan said today that Obamacare cost-sharing reduction payments will not be part of a bill to keep the government funded past Friday.

Toward the end of a House leadership press conference Wednesday morning, Ryan said negotiations had brought the two sides “really close” to an agreement. “Obviously, CSR’s we’re not doing that. That is not in an appropriation bill that is something separate that the administration does,” Ryan said.

Yesterday the Hill reported that Republicans and Democrats were “horse-trading” over elements of the bill to keep the government running. The Trump administration is seeking billions in new defense spending and Democrats wanted to fund CSRs:

Democrats have offered to agree to an additional $15 billion in military funding as part of a spending package to keep the government operating if Republicans in Congress agree to fund ­ObamaCare insurer subsidies.

Signing off on the Democratic offer would avert a government shutdown set to begin Saturday.

Cost-sharing reduction payments are separate from the subsidies used to lower the cost of insurance premiums for people buying Obamacare plans on the exchanges (those who make under 400% of the federal poverty line). CSRs are additional payments made directly to insurers to lower out-of-pocket costs including copayments and annual deductibles. However, the way the law is written means that insurers must discount those items for people at the low end of the income scale whether or not they are receiving the money to cover it from the federal government. So if the CSRs are cut off, as Democrats worry the Trump administration made decide to do, insurers will be losing, even more on the exchanges than they already are.

However, the way the law is written puts insurers in a difficult spot. Insurers must discount those items for people at the low end of the income scale. That’s true whether or not they are receiving the money to cover those costs from the federal government. So if the CSRs are cut off, as Democrats worry the Trump administration may decide to do, insurers will be losing even more on the Obamacare exchanges than they already are.

Realistically, insurers who stand to lose millions on the unreimbursed CSRs will simply drop out of the Obamacare exchanges. Today, Modern Healthcare reports that Anthem, one of the nation’s largest insurers, is waiting to see what will happen with CSRs before deciding whether to bail out entirely:

Anthem will submit 2018 rates assuming that the cost-sharing reduction subsidies will be funded, Swedish said. But the insurer told states that if funding for the subsidies is still uncertain by early June, it may make changes to its rate filing. Changes could include increasing rate, pulling products, or even exiting the market entirely.

Without funding for subsidies, Swedish estimated that rates could increase 20% or more. Moreover, if the annual tax on health insurance companies isn’t repealed, rates could increase an additional 3% to 5%, he said.

So that’s why Democrats are so eager to see this funded. It’s also why Paul Ryan saying CSRs definitely won’t be part of the bill to keep the government going could be very significant. If that stands, the Trump administration could potentially cut off the CSR funding which would result in more insurers getting out of the markets, further decreasing competition. It will also make it necessary for those who remain to raise prices by double digits once again.